Home Building set for Another Massive Year

Tuesday, March 22nd, 2016
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Australia remains on track to record its second strongest year on record in terms of housing starts as the nation’s home building market remains extremely strong in buoyant in eastern states despite the likelihood of an impending slowdown in 2017.

In its latest forecasts, the Housing Industry Association (HIA) says it expects ground to break on 199,910 houses and multi-residential units throughout Australia in 2016 – down from last year’s whopping figure of 220,060 but still the second strongest year on record, eclipsing the 198,640 houses and multi-units approved in 2014.

Leading the way are Queensland, New South Wales and Victoria, the first two of which will experience their second highest year of commencements for at least a decade and the third of which will break ground on 58,500 new dwelling units – well above the 40,000 which was commonplace around a decade ago.

Speaking particularly about Queensland, HIA senior economist Shane Garrett said the pipeline of activity was strong and that anecdotal evidence supported the idea of another year of robust activity.

“We also have stable and sustainable price growth in the Brisbane market,” he said. “As well as that, Queensland is well placed to benefit from the improved competitive situation that results from the Aussie dollar being so much more cheaper now. Things like tourism and also international education will help the market there along as well.”

In the case of New South Wales and Victoria, Garrett said momentum in the first half of the year will be underpinned by strong price growth over the past year and a robust pipeline of work.

Continued low interest rates would make it less expensive for developers to build and would help attract some who are currently renting into the new home market, he added.

Garrett’s comments come as deals continue to come through in the red-hot market for high-rise apartments despite expectations of a slowdown in the market.

In Brisbane, for example, World Class Land, a subsidiary of Singaporean developer Aspinal has lodged a development application to build a whopping 91-storey tower complex at 240 Macquarie Street in Brisbane after securing approval for a similar size building at 30 Albert Street.

In Melbourne, a syndicate of expatriate Chinese investors has bagged approval to deliver more than 1,800 apartments in twin high-rise towers.

Nevertheless, HIA does see a slowdown starting to take effect in the second half of the year, with activity set to drop back to more normal levels of between 160,000 homes and 170,000 homes over the three years from 2017 onward.

Garrett says the slowdown will be driven by an easing in price growth, restrictions on foreign investors and the slowdown in China as well as constraints on credit provided to domestic investors and eventually, a likely gradual tightening of monetary policy.

He says the apartment sector, which has experienced the lion’s share of the upturn and is traditionally more volatile and sensitive to issues relating to confidence, will probably experience the biggest share of the slowdown.

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